Impacts of alternative marketing agreement cattle procurement volumes on packer margins, costs, and profits

Abstract

This presentation analyzed monthly plant-level profit and loss statements from four large packers to determine effects of use of AMAs on meatpacker gross margins, costs, and profits. Combined slaughter and processing costs are significantly lower for plants with higher volumes of AMA cattle relative to cash market cattle. Plants slaughtering cattle from AMA sources operate at higher monthly volumes, have more predictable volumes, and have lower average costs per head. They also have higher gross margins due to increased revenue and higher average profits per head. Restrictions on AMAs would negatively affect packing industry efficiency, beef demand, and meatpacker profitability.